RBI Maintains Rate, Shifts to Neutral Policy

In a key shift, the RBI changed its monetary policy stance from 'withdrawal of accommodation' to neutral, while keeping the policy repo rate unchanged at 6.5% for the tenth straight time in its latest meeting.

Previously, the 'withdrawal of accommodation' stance meant the RBI was tightening the money supply to manage inflation. With the neutral stance, the RBI is no longer pushing to increase or decrease spending. For borrowers, this may lead to better loan offers during the festive season, though deposit rates could stabilise.

This marks the first stance change in nearly 30 months, seen as a step toward easing rates. RBI Governor Shaktikanta Das explained, "With both inflation and growth well balanced, there was no justification to continue with the withdrawal of accommodation. We have achieved what we wanted to achieve. While we have greater confidence that inflation is moderating, considering the significant risks that lie ahead of us, it will be inappropriate to specifically talk in terms of the timing of a rate cut.”

The decision to hold rates steady saw a 5-1 majority vote, with all members, including new external members, agreeing on the change in stance. As a result, the standing deposit facility rate remains at 6.25%, and the marginal standing facility and bank rates stay at 6.75%.

Das also noted that real GDP grew 6.7% in Q1 FY25, driven by a recovery in private consumption and higher investment, with investment’s share of GDP hitting its highest since 2012-13. He emphasized that current interest rates were not hindering growth.